1. Setting Aside Arbitration Awards: the U.S. Perspective
Philip D. Robben
Kelley Drye & Warren LLP
for the
Nani Palkhivala Arbitration Centre
Annual International Conference
“Strengthening Arbitration In India”
Chennai, India
March 15, 2014

2. Introduction The U.S. Legal System U.S. Arbitration Law
Confirmation/Recognition of an Award
Setting Aside an Award
Manifest Disregard of Law

3. The U.S. Legal System (I)
The United States is a federal republic of 50 states plus several territories and protectorates.
At both the national level and in each state there are legislative and executive branches of government that, respectively, enact and enforce the laws.
Each state is a sovereign that is independent of every other state and the national government. But, there are limits:
U.S. Constitution
Federal laws may preempt inconsistent state laws.

4. The U.S. Legal System (II)
The U.S. court system has two basic parts:
Federal court system (a/k/a “federal courts”)
Fifty state court systems (plus territorial courts)
Both the federal and state courts have a common law system based on English common law.
Louisiana and Puerto Rico are civil law exceptions
In some areas, including arbitration, the federal and state legal systems have over-lapping jurisdiction.
But … most international arbitration cases are heard in federal court.

5. The U.S. Legal System (III)
The federal courts consist of:
District Courts (trial level, at least one per state)
Courts of Appeal (13 judicial “circuits”)
Supreme Court (Washington, D.C.)
Each state has its own court system governed by the state’s constitution and internal law.
Most state courts have three levels like the federal system, but there are exceptions where appeals are to the court of last resort.

6. U.S. Arbitration Law (I)
Both the federal legislature and state legislatures have enacted laws relating to arbitration.
U.S. federal policy strongly favors arbitration, even involving statutory causes of action (e.g., antitrust claims).
Recently, some have argued for legislation that would restrict the use of arbitration in the labor and consumer contexts.
Federal Arbitration Act (“FAA”)
The primary U.S. arbitration statute.
Under the FAA, agreements to arbitrate “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”

7. U.S. Arbitration Law (II)
The FAA contains limited procedural rules and provides for limited court intervention in arbitrable disputes.
Under the FAA, courts may:
Stay court proceedings and compel arbitration where the dispute falls within the scope of the parties’ agreement to arbitrate.
Appoint arbitrators in limited circumstances.
Compel compliance with an arbitrator’s subpoena.
Other than these limited circumstances, courts generally do not have involvement in arbitration proceedings.

8. U.S. Arbitration Law (III)
Post-Award Proceedings:
Under the FAA, there is essentially a presumption in favor of enforcing arbitration awards. Judicial review is quite limited under the FAA.
The FAA does permit a court to vacate certain arbitration awards based on limited grounds exclusively set out in the FAA.
New York Convention and Panama Convention
Implemented by Chapters 2 and 3, respectively, of the FAA.
The New York and Panama conventions area the “supreme law of the land” in the U.S.

9. U.S. Arbitration Law (IV)
State arbitration laws:
As a practical matter, state arbitration laws have limited application because the FAA preempts inconsistent state law.
State arbitration law typically has no application to international arbitration.
In theory, state law might come into play where the FAA or an international convention are silent.

10. Confirmation/Recognition of an Award (I)
Section 9 of the FAA provides the mechanism for a party to seek confirmation of a domestic arbitration award.
Where the parties have agreed that a court may enter judgment on an arbitration award, the court must enter judgment “unless the award is vacated, modified or corrected” as permitted by the FAA.
Recognition of international arbitration awards is typically governed by either the New York Convention or the Panama Convention.
Section 207 of the FAA provides the mechanism for a party to seek recognition of an international arbitration award.
A court “shall” confirm an award under Section 207 unless one of the grounds in Article V of the New York Convention applies.

11. Confirmation/Recognition of an Award (II)
Beware: Some circuits hold that the court must have “personal jurisdiction” over the respondent to recognize and enforce an international arbitration award in the U.S.
Sometimes personal jurisdiction involves a complex inquiry.
Under certain circumstances, property or money in the U.S. is sufficient to find jurisdiction (but only to the extent of such property).
Note: Different statutes of limitation:
Domestic arbitration awards: 1 year.
International arbitration awards: 3 years.

12. Setting Aside an Award (I)
Applications to vacate an arbitration award are governed by Section 10 of the FAA.
Very short statute of limitations: 3 months.
The majority view in the U.S. is that FAA section 10 applies to applications to vacate both domestic and international/non-domestic awards based on arbitration proceedings held in the U.S.
Of particular importance, the Second and Third Circuits (which include New York and Delaware) have adopted the majority view.
In Hall Street Associates, LLC v. Mattel, Inc. (2008), the U.S. Supreme Court held that the grounds set out in Section 10 are the only grounds available.

13. Setting Aside an Award (II)
Section 10 allows a court to vacate an award on limited grounds:
“Where the award was procured by corruption, fraud or undue means”
“Where there was evident partiality or corruption in the arbitrators”
“Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced”
“Where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made.”

14. Setting Aside an Award (III)
The grounds under Section 10 are mostly consistent with the grounds from denial of recognition and enforcement set out in Article V of the New York Convention.
But, in certain respects, the Section 10 grounds are arguably broader than those in Article V of the New York Convention.
Where recognition and enforcement of an international award rendered outside the U.S. is sought, Section 10 is not applicable.
In these circumstances, a U.S. court cannot vacate the award.
Under Section 207 of the FAA, recognition/enforcement may be refused only on the grounds set forth in Article V of the New York Convention.

15. Manifest Disregard of Law (I)
Several circuit courts have adopted the “manifest disregard of law doctrine”, which does not have a corollary in the New York Convention.
The Second Circuit has held that in order to set aside an award under the doctrine, the court must find that the arbitrator was aware of, but ignored, governing law that was well defined, explicit, and clearly applicable.
The doctrine does not permit an award to be set aside for mere errors of law by the arbitrator.
Manifest disregard of law is very rarely found, particularly in international arbitration.
In August 2012, the New York City Bar reported that no international arbitration award had ever been set aside by the Second Circuit on grounds of manifest disregard of law.

16. Manifest Disregard of Law (II)
What about Hall Street?
The Hall Street court dealt with the manifest disregard doctrine only in dicta.
As a result, the validity of the doctrine remains unclear and is the subject of a “circuit split” among the federal appeals courts:
The Second, Fourth and Ninth Circuits continue to apply the manifest disregard doctrine subsequent to Hall Street.
The Fifth, Eighth, and Eleventh Circuits interpret Hall Street as an explicit rejection of the manifest disregard doctrine.
The Seventh Circuit appears willing to apply the manifest disregard doctrine, at least in certain circumstances.
The First Circuit has issued conflicting decisions.

17. Questions? – Please Contact Me
Philip D. Robben
Kelley Drye & Warren LLP
101 Park Avenue
New York, New York USA
Phone: +1 (212)
Fax: +1 (212)

18. Philip D. Robben
Philip D. Robben is a partner at Kelley Drye & Warren LLP, based in the firm’s New York office,. He is Co-Head of the firm’s International Arbitration Practice Group. His practice focuses on international and domestic litigation and arbitration. Mr. Robben’s experience includes the representation of multinational clients in disputes concerning bilateral investment treaties, fraud allegations, breach of contract, the False Claims Act, and the enforcement of foreign judgments in the U.S. courts. He represents clients in industries such as pharmaceuticals, construction, technology, industrial manufacturing, banking and finance, and consumer products.